so let’s discuss interest rates… - Posted by Adam (IN)
Posted by Adam (IN) on May 09, 2007 at 21:53:33:
bare with me because my thoughts are clear in the head and ill try and make them clear here…
so ive been in the business full-time for almost 2 years now and interest rates (or better yet what rate to charge) have been something ive spent many hours thinking about
alright so im selling a bunch of homes and as is the business, some come back and given the recent discussion on “flakes” and the fact that the vast majority of these homes will come back, i’ve been thinking why charge interest (or at least high interest) on these homes?..ill explain
first of all i realize that interest is the charge made on money you loan out but in the case of a Lonnie Deal, you don’t lend any money you simply sell an asset on payments
well lets make some assumptions…lets say you have a home that you want to get 250/month out of, well unless you KNOW the loan will mature than the interest you charge is just extra money you have to pay the IRS right? if i want 250 a month for 48 months 0% and you want 250/month for 60 months 15% but both the people flake out after 12 months i get 3000, you get 3000 but i pay no interest on my schedule B, you do and more importantly an escallating amount the higher rate of interest you charge!
i was raising the interest rate i was charging to around 17.75% until it came tax time and realized i was paying a bundle in interest charges on home that did not, or i was pretty sure would not, ever mature
now i like to think im a pretty intelligent person so here’s hoping someone in the first reply doesn’t throw out something to kill my thinking and make me look like a fool but i know there’s some great minds on this board so i’d love to hear some thoughts
plus i usually just provide input so i figure im due to arrouse some discussion!